- 8 min read
- Wisconsin is one of 10 community property states.
- Debt created during marriage in Wisconsin might be community debt.
- Be careful -- Wisconsin community property law is tricky.
Learn if You Must Pay Your Spouse's Debts in Wisconsin
Wisconsin is one of 10 community property states. You may have liability for your spouse’s debt even if you had no knowledge of the account. But Wisconsin’s community property law for spousal debt is tricky, so do not assume you must pay your spouse’s debt automatically. Also, a separate law called the doctrine of necessaries may obligate you to pay your spouse’s debt in Wisconsin. If you are married and reside in Wisconsin, you need to understand if you have liability for your spouse’s debt.
This article focuses on spousal debt liability, but there’s much more to Wisconsin’s Marital Property Act than spousal debt. See The Impact of Wisconsin’s Marital Property Act on Family Law (PDF) and Wisconsin’s Marital Property Law to learn how Wisconsin law handles divorce, spousal rights, and credit applications.
|Community Property States|
Community Property at a Glance
In community property states, the presumption is wealth or debt created during the marriage is part of the marital community. Therefore, courts in community property states assume a debt incurred from the date of marriage to the date of divorce is a community debt that is to be divided equally between the spouses.
Many courts in community property states assume the rents, profits, and issues of separate property remain separate. The fruits of community property are community assets. If a spouse claims a certain property is separate, it is up to that spouse to prove the property was acquired with separate funds or separate credit.
By contrast, separate property is property acquired before marriage, and property acquired by a spouse during marriage through gift, inheritance, or an award for personal injury damages.
Wisconsin Law & Community Property
The Wisconsin Marital Property Act classifies debts and gives creditors different collection remedies depending on the type of debt (Wis. Stats. § 766.01(5)). Wisconsin courts must analyze a debt to determine the extent of a married person’s liability for the debt. They must follow a three-step process to classify the debt. The first step is to find what Wisconsin calls the determination date. The determination date is the date spouses and their property become subject to the Marital Property Act. The determination date is after all of the following occur:
- January 1, 1986
- The date the spouses were married, and
- The date that both spouses were domiciled in Wisconsin.
Different collection consequences depend on whether the debt arose before or after the spouses became subject to the Marital Property Act. The date the debt arises would be the date the act or omission creating the obligation occurred (such as the date the debt became delinquent).
Wisconsin Pre-Marital Debt
For debt arising before the determination date, a judgment-creditor or tax authority can collect from any of the following sources:
- All of the separate property of the debtor spouse, and
- Any part of marital property that would have been property of the spouse but for the marriage or the enactment of Wisconsin’s Marital Property Act, and
- The couple’s community property is off-limits to judgment-creditors, but not to the IRS, which can reach the marital property of the debtor spouse, which is presumably half of all community property (Wis. Stats. § 766.55(2)(c) 1. and 2.)
Wisconsin Marital Debt
For debt arising after the determination date, the property judgment-creditors and the IRS may use to satisfy delinquent debt or taxes is different from that which may be used to satisfy a predetermination date debt. The Marital Property Act classifies post-determination date debts as follows:
- Debts incurred in the interest of the marriage and family (family purpose obligations), and
- Debts not incurred in the interest of the marriage and family (non-family purpose obligations) (Wis. Stats. § 766.55(1)).
Under the the Marital Property Act, debts arising after marriage and after the effective date of the Act are family purpose obligations. The law therefore assumes that the debt was incurred in the interest of the marriage or family, unless the debtor shows otherwise (Wis. Stats. § 766.55(1)).
With regard to family purpose obligations arising after the determination date, these debts can be collected from any of the following sources:
- All of the property of the spouse who owes the debt or taxes that is not marital property, and
- All marital property.
With regard to non-family purpose obligations arising after marriage and after January 1, 1986, these debts can be collected from any of the following sources:
- All of the property of the spouse who owes the debt or taxes that is not marital property, and
- 1/2 of marital property. (Wis. Stats. § 766.55(2)(d))
Struggling with debt you or your spouse have difficulty paying? Contact one of Bills.com’s pre-screened debt providers for a free, no-hassle debt relief quote.
Consult with a Wisconsin lawyer who has family law experience to learn more about Wisconsin community property law. If you cannot afford a lawyer, contact Legal Action of Wisconsin or another Wisconsin pro bono program to find low- and no-cost legal services.
|Wisconsin Community Property Law at a Glance|
|Husband or wife liable for debts of other incurred before marriage?||See Wisconsin Pre-Marital Debt discussion above.|
|Husband or wife liable for debts of other incurred during marriage?||See Wisconsin Marital Debt discussion above.|
|When do spouses become subject to state community property laws?||On the determination date, which is the first day after marriage, both spouses domicile in Wisconsin and January 1, 1986 (the effective date of the Marital Property Act in Wisconsin).|
|Does the state recognize common law marriage?||No, but it recognizes a common law marriage legally established elsewhere.|
|Does the state recognize some from of domestic partnership as an alternative to marriage?||Yes.|
|Does a domestic partnership under state law create community property rights and obligations?||No.|
|When does the community property regime terminate (causing subsequently acquired assets or future income to no longer be characterized as community property)?||Change of domicile, death, decree of divorce or decree of legal separation or decree of separate maintenance.|
|How is post marital income generated from separate property (e.g., rents, dividends, interest) characterized?||Marital (community) property.|
|How does the state characterize appreciation in the value of separate property?||Market appreciation is individual (separate) property. Appreciation due to the efforts of either spouse or application of marital (community) property is marital (community) property.|
|How does the state characterize property taken by spouses under a deed reflecting that the property is held in joint tenancy?||Marital (community) property with right of survivorship, which in Wisconsin is called survivorship marital property, unless the deed was executed before 1/1/86. If the deed predates 1/1/86 it is a joint tenancy.|
|How does the state characterize property taken by spouses under a deed reflecting that the property is held in tenancy in common?||Marital (community) property unless the deed was executed before 1/1/86. If the deed predates 1/1/86, it is a tenancy in common.|
|Does a deed taken in the name of one spouse as sole and separate property create separate property?||No. Title does not determine the character of the property. It is rebuttably presumed to be community property.|
|Does the state recognize pre or post marital property characterization agreements?||Yes.|
|What are the property characterization agreements called?||Marital property agreements.|
|Are property characterizations agreements required to be in writing?||Marital property agreements must be in writing.|
|Are property characterization agreements valid against creditors?||If incurred after the determination date, no, unless creditor has actual notice of the agreement before the obligation is incurred. If incurred before the determination date, yes as to future income or property.|
|What property is available to satisfy a premarital federal tax obligation assessed against only one spouse?||1. All individual (separate) property of the debtor spouse, 2. Half of marital (community) property and 3. all marital (community) property that would have been debtor spouse’s individual (separate) property but for marital property law or the marriage.|
|What property is available to satisfy a post marital federal tax obligation assessed against only one spouse?||Assuming the obligation is incurred in the interest of the marriage and family, 100% of marital (community) property and all separate property of liable spouse.|
|Wisconsin Community Property law: Wis. Stats. § 766|
Wisconsin Community Property Law. Source: IRS and Bills.com
Wisconsin Doctrine of Necessaries
Wisconsin residents who deal with a spousal debt question must know community property law and the doctrine of necessaries to understand their liability for a spouse’s debt. Wisconsin’s doctrine of necessaries law is not part of community property law, but it may be very important to you.
Unsure how to handle your debt? Let the Bills.com Debt Coach tool give you a customized report on your debt resolution options. It’s free!
The doctrine of necessaries is a law giving creditors a right to collect a certain type of debt from a debtor’s spouse or the parent of a minor child. Some states repealed their doctrine of necessaries laws. Wisconsin has not. To learn more about Wisconsin’s doctrine of necessaries rule, read the Bills.com article Doctrine of Necessaries Rules For All States.
Dealing with debt
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q2 2022 was $16.15 trillion. Student loan debt was $1.59 trillion and credit card debt was $0.89 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in Florida, 29% have any kind of debt in collections and the median debt in collections is $2137. Medical debt is common and 14% have that in collections. The median medical debt in collections is $915.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.